HMC
Honda Motor Co., Ltd.
$34.58
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 38.9% above fair value
You pay
$34.58
Bear
$18.34
Fair
$24.89
Bull
$31.44
Bear
$18.34
-47.0%
$2.62 × 7x
Fair
$24.89
-28.0%
$2.62 × 10x
Bull
$31.44
-9.1%
$2.62 × 12x
Adjust Assumptions
9.5x
2.62$
Key Value Driver
Through-cycle normalized EPS ($2.62)
Implied Market Multiple
13.2x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (18 analysts)
$34.00
Divergence from AlphaVal
27%
Summary
Using 7-year normalized EPS of $2.62 at a 10x cycle multiple, the base-case value is $24.89 per share. P/TBV cross-check: 0.6x.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Price-to-book value of 0.6x is below the typical low point. This could be a bargain, but check whether asset write-downs are coming.
Wall Street's average price target is $34.00 (from 18 analysts). Our estimate is 27% below the consensus -- consider that gap carefully.
Financial statements were converted from JPY into USD using USDJPY at 0.0064 USD per JPY.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing